The franchise organization will have to maintain and continuously develop the franchise formula. The competitive position of the franchise must be maintained or further improved. The contribution towards these activities is the royalty, which is often calculated as a percentage of the revenue and periodically (for example once a month) incurred. There are also other royalties which may be agreed on, such as a fixed-royalty, a fixed amount per year payable per month. The royalty also incorporates an element of profit for the franchisor.

Creating a marketing and advertising policy, preparing the marketing activities and its execution are performed centrally. The costs the franchisor incurs to do this are divided among the franchisees. The marketing fee is often calculated as a percentage of the revenue, however other methods occur as well.

The question whether a system of royalties and fees are reasonable and fair is not easy to answer. Much depends on the specific special knowledge and skills the franchisor has to offer and the amount of investment he has to do in the franchise formula. Furthermore, the height of the fees depends on the investments and exploitation-expectations of an average venture in the franchise organisation. It is vital that a balance exists in what a franchisor needs to receive and what the franchisees are reasonably able to afford to pay. The best guarantee for continuity of the franchise is, after all, based on profit for both the franchisor as well as the franchisee.

Read on about the different forms of internal communications and participation in decision making in franchise organisations.